GILTS: Bull Steepening On Soft Labour Data, Over 80% Odds Of Dec BoE Cut Priced
Gilts have rallied on the back of this morning’s soft labour market data.
- Futures trade as high as 93.72.
- Resistance at the Nov 4 high/bull trigger (93.98) untested, with technical parameters remaining bullish and the recent pullback deemed corrective.
- Yields 5-7bp lower, curve bull steepens.
- 2-Year gilt yields print the lowest level since August ’24 (3.732%).
- Fresh extension lower would target the 22 August ’24 low (3.653%).
- The 2s10s curve is ~6bp off its October low, last ~66.5bp. Uptrend support drawn off the August ’23 lows remained intact during October/early November. We detailed steepening risks for that curve in the early part of last week.
- SONIA futures little changed to +7.0, SFIZ6 year-to-date highs (96.700) intact.
- BoE-dated OIS prices ~21bp of easing for December, 30bp through February and 39bp through March.
- BoE Governor Bailey is viewed as the key swing voter. This morning’s data increases the odds of him voting for a December cut.
- We believe that volatility around non-Bailey MPC speeches is likely to be much reduced ahead of the Budget on Nov 26, given the entrenched views of other MPC members.
- This certainly held true as MPC hawk Greene reiterated her previously aired areas of focus this morning, having no impact on the short end & gilts.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA (bp) |
Dec-25 | 3.762 | -20.7 |
Feb-26 | 3.667 | -30.3 |
Mar-26 | 3.579 | -39.0 |
Apr-26 | 3.469 | -50.1 |
Jun-26 | 3.423 | -54.7 |
Jul-26 | 3.369 | -60.1 |
Sep-26 | 3.345 | -62.4 |
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US: Trump Oval Office Announcement Underway Shortly
US President Donald Trump is shortly due to deliver an announcement in the White House Oval Office. LIVESTREAM The announcement is expected to relate to drug pricing and could follow a similar template to a recent pledge from Pfizer.
- The announcement will be Trump's first press remarks since a market-moving Truth Social statement earlier today in which Trump suggested calling off a meeting with Chinese President Xi Jinping and raising tariffs on China in response to new export controls from Beijing on rare earths. See earlier bullets here and here.
RATINGS: Moody's Completes Periodic Review Of Belgium, No Rating Action
No ratings actions for Belgium from Moody's, which is quoted in a press release on Bloomberg: "Moody's Ratings (Moody's) has completed a periodic review of the ratings of Belgium and other ratings that are associated with this issuer. The review was conducted through a rating committee held on 2 October 2025 in which we reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), and recent developments. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future."
- There had been some speculation there could be a ratings action - MNI wrote Thursday: "* Moody's on Belgium (Current rating Aa3, Outlook Negative): We expect Moody's to maintain their current stance in the absence of 2026 budget details."
MACRO ANALYSIS: US Macro Week Ahead: No CPI, But Plenty Of Pre-Blackout FedSpeak
Below is the week’s data schedule, with MNI’s annotation of whether or not data will be postponed.
- As we went to press, the Fed announced that next week's Industrial Production data will be postponed (was due to be published next Friday Oct 17) as the data “incorporate a range of data from other government agencies, the publication of which has been delayed as a result of the federal government shutdown.”
- We won’t be getting September CPI as scheduled on Oct 15, but at least the BLS announced it will publish the data on Oct 24.
- As such next week we’ll be looking at some under-covered data points, including the Redbook weekly and Chicago Fed’s CARTS retail sales data (in lieu of the Census Bureau retail sales report), with a little more focus than usual on regional Fed manufacturing indices (NY, Philadelphia).
- Once again, the dearth of tier-one data leaves Fed commentary in focus ahead of the pre-FOMC blackout period: highlights for us are Philadelphia Fed President Paulson making her first comments on monetary policy on Monday since being appointed in the summer, while as always Chair Powell bears watching on Tuesday (we also hear from Bowman, Waller, Collins, Miran, Schmid, and Musalem).
- Additionally we get the latest Beige Book which was already key given the FOMC was already increasingly focused on anecdotal information as it attempts to navigate murky economic waters.
